Christian and Danny explain how to handle a multifamily conversion when frozen pipes cause uninsured damage because the roof is over 20 years old. The owners seller-finance their equity to a partner with capital to finish the renovation, then get paid out through a cash-out refinance. They walk away with cash despite losing some net worth.
Chapters
Hey, Christian and Danny here. Real estate has 3 pieces you got to manage: cash flow, liquidity, and your equity. Now this building flooded with a whole bunch of pipe bursts. The only thing insurance doesn't cover is frozen pipes on properties where the roof is over 20 years old. It is middle of construction turning this into multifamily, so we do in fact have an old roof and had busted pipes. How do you navigate this? Well, you move your pieces. I have a partner on this. Who wants to finish the project, has the cash to finish the project, and can make it through with or without insurance. We have equity right now. We're going to go ahead and trade that equity for cash flow. We're seller financing our equity to the partner. They're going to finish the project. They'll pay us out of the cash-out refi and pay us along the way. I'm getting paid to not do this project, and while I lose a little bit of net worth, we bought this zero down and walking away with a check to not do the rest of the project. Could be worse. Manage your pieces well. There's only 3 resources.